With an estimated 1000 local residents now out of work and those numbers projected to increase significantly, Premier of the Virgin Islands, Andrew Fahie is in now conversation with local banks to negotiate for an extended one-year moratorium.
This announcement was made via a Government press conference aimed at addressing the concerns of the media. The Premier is requesting that moratoriums on personal and business loan payments and penalties be revised to ensure that people get proper relief.
Premier Fahie said “we cannot continue to act in COVID-19, which is something that’s not normal and applying normal procedures to it. So I’m asking the banks and discussing with them to stretch from your normal 3-months and 6-months and move straight into the one year so that the moratorium can more effectively help the people of the Virgin Islands”.
WHAT IS A MORATORIUM
We have been hearing the word moratoriums a lot recently, but what exactly does it mean?
A moratorium is most commonly an official suspension or legal delay of payment for a specified period. So essentially, it refers to the postponement of the requirement to make that payment, for e.g. rent or mortgage payments. These moratoriums are often enacted during emergencies or other unusual circumstances, in this case a pandemic, in order to provide relief to people who have lost their usual source of income.
Via an E-Forum hosted by Money Matters BVI in March, it was announced that all six of the major lending institutions in the BVI will offer moratoriums to their respective clients due to COVID-19.
While these options are now available, they are few conditions.
NOT AUTOMATIC
Via the E-forum , Retail Manager at CIBC First Caribbean International Bank, Fabian Devonish said “It is not automatic, they can reach out through our internet banking platform and request it or they can reach out to their individual lenders or myself as Branch Manager and advise us that they are interested in taking the payment moratorium,”
NOT A FORGIVEABLE DEBT
It is very important to note that the payments will be deferred and not “written-off”. While a client may be able to postpone payments, it must be cleared once economic activity resumes; when business starts to regenerate funds or when a person re-employed.
This is perhaps one of the challenges faced by homeowners who are now pressured to forgive their tenant’s monthly rent. While banks may offer moratoriums affording more time to pay mortgage, landlords stand to inherit the debt if they are to be lenient with tenants.
INTEREST CONTINUES TO BE ADDED
Once you are approved for a moratorium, you are still required to pay the interest accrued over that period. Via the same e-forum in march, Mr. Devonish strongly encouraged persons to pay interest on a monthly basis to prevent it from accumulating at the end of the period.
The length of the moratorium period of can vary person to person or identity crisis to identity crisis but within the BVI, there is usually an offer to waive principal and interest payments for up to three months in the first instance with the option of going for up to six months.
However, the Premier is now advocating for a one-year moratorium period, in light of the Coronavirus-inspired recession.